NYCB Faces a Tough Road to Profitability

New York Community Bancorp (NYCB) shares fell Thursday aft nan troubled location bank’s way to profitability was muddied by disappointing second-quarter net results.

NYCB slashed its 2025 diluted halfway earnings per share guidance to a precocious of conscionable 5 cents, down from its erstwhile estimate of 35 cents to 40 cents. For 2024, nan slope expects to suffer betwixt $2.20 and $2.30 per share, wider than a antecedently expected 50 cents to 55 cents.

Shares of NYCB fell 3% connected Thursday. The banal has mislaid astir two-thirds of its worth this year.

“Our second-quarter capacity reflects nan ongoing actions guidance is taking during this transitional twelvemonth arsenic we reposition nan slope for semipermanent success,”  Chief Executive Officer (CEO) Joseph Otting said successful a statement. 

Otting, who was appointed successful March, has pledged to trim NYCB’s reliance connected commercial existent property (CRE), which includes multifamily loans. CRE loans for nan slope fell 4% year-over-year, aliases by $362 million, successful nan period, while multifamily loans declined 2%, aliases $848 million.

Loans to Rent-Regulated NYC Buildings Hurt

A symptom constituent for NYCB is its loans to rent-regulated multifamily buildings successful New York City. High liking rates, persistent inflation and falling spot values are putting owners of specified buildings successful a bind, jeopardizing their expertise to repay loans. 

NYCB has reduced its multifamily portfolio to $33.9 cardinal astatine nan extremity of June from $35.4 cardinal arsenic of June 30, 2023. In May, NYCB agreed to sell astir $6 cardinal of owe storage loans to JPMorgan Chase (JPM). The transaction closed connected Monday.

Flagstar Bank Deal

NYCB besides said Thursday that its Flagstar Bank portion agreed to waste its residential owe servicing business to Mr. Cooper Group (COOP) for $1.4 billion.

“While nan owe servicing business has made important contributions to nan Bank, we besides admit nan inherent financial and operational consequence successful a volatile liking complaint environment, on pinch accrued regulatory oversight for specified businesses,” Otting said. 

The transaction is expected to adjacent successful nan 4th quarter.

NYCB posted a nonaccomplishment of $1.14 per diluted share, overmuch wider than nan 43 cents expected by analysts, per Visible Alpha. Net liking income was $557 million, beneath expectations of $587.6 million.